The Trading Taboo! Don't Let Frequent Trading Ruin Your Investments!

In financial investment, most investors know that frequent trading is a taboo and should be avoided. Many investors tell themselves repeatedly that they should control their impulses and refrain from frequent trading, especially after experiencing losses. However, when it comes to actual trading, they still tend to trade too often.

Most people attribute the reason for frequent trading to greed or poor mentality. But is this really the reason？ If not, what is the real reason, and how can we control frequent trading？ In fact, the fundamental reason why most investors cannot control frequent trading is not due to their mentality. Although good mentality is essential for trading, it is built on a solid foundation of fundamental knowledge and skills.

In forex trading, investors need to establish clear trading rules and plans before making any trades. Even if they have trading rules and plans in place, if they are not detailed enough, it can lead to entering positions that may not be profitable, such as entering when the price is volatile and the trading sentiment is emotional.

In financial trading, market conditions are constantly changing, either rising or falling. Especially in the forex market, where investors can trade in both directions and with high leverage, it is easy for investors to believe that every market movement is a potential profit opportunity. Whether the market is rising or falling, investors may see it as a chance to make money. This is what we call frequent trading.

In actual trading, human emotions can easily be influenced by the current market sentiment. For example, when the market is falling, people tend to become pessimistic, while when the market is rising, people tend to become overly optimistic. Once emotions are affected by market fluctuations, it can lead to chasing highs and selling lows, or buying at high prices and selling at low prices. This is especially true for novice traders, and it is the main and fundamental reason for their losses. Without a strict trading system and plan, no matter how many times investors regret and repent, they will continue to make the same mistakes. If there are no trading rules, investors who swear to reduce frequent trading will be delusional.

For most novice traders, the market only goes up or down, and with volatility comes opportunity and price differences, which translate into profits. Since the market is constantly fluctuating, there is always an opportunity to profit. Therefore, it is impossible for them to place orders cautiously and reduce trading frequency, as they do not have a clear trading system and plan to improve their success rate. If they reduce the frequency of their trades, the success rate is still low, and the profit-to-loss ratio is still low. Therefore, these novice traders will inevitably increase their trading frequency, and failure is inevitable for them.

Without a solid trading plan and strategy, it is difficult to control one's emotions and make rational decisions. The key to successful trading is not just about seizing every opportunity, but also about avoiding unnecessary risks and losses. Therefore, it is essential for traders to have a disciplined approach to trading that includes a well-defined set of rules and guidelines to follow, and a comprehensive risk management plan to minimize losses. By doing so, traders can maintain a clear head and make informed decisions that lead to long-term success in forex trading.

For experienced traders, although they have established their own trading rules and suitable trading systems, they may still lack clarity and strong execution. Especially for traders who suffer more losses than gains, they often feel dissatisfied and fear missing out on opportunities, leading them to engage in frequent trading.

When faced with high profits, most investors tend to forget about risks and focus solely on profits. For example, if they initiate a long position but the market quickly drops, triggering a stop loss, investors may still want to continue trading. If they see the market continuing to rise, they may feel anxious and fear missing out on this upward trend.

In summary, it's crucial for traders to accurately determine whether the market is in a trend or a range. Both novice and experienced traders are prone to the pitfall of overtrading. Therefore, WikiFX advises traders to establish a trading system that suits them and make a trading plan before each trade. Only execute trades that conform to the trading plan, and avoid those that do not. By doing so, traders can avoid overtrading and increase their chances of success in the Forex market.